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The federal watchdog agency created to protect consumers is not regulating two of the country’s fastest-growing financial institutions despite receiving voluminous complaints about them, according to an analysis by NerdWallet.

A NerdWallet investigation found that many other businesses also are not subject to oversight by the Consumer Financial Protection Bureau despite being the subjects of many complaints.

The lack of supervision means that consumer grievances about the companies do not appear on a public complaint database the bureau set up to help guide consumer decisions.

The absence prevents the CFPB from defending consumers in tens of thousands of disputes and gives the companies an advantage over competitors that are subject to bureau oversight. It also falsely assures consumers about the integrity and service the companies provide.

A NerdWallet analysis of previously undisclosed CFPB data shows that Green Dot, a dominant prepaid card company, and Credit One, a leading credit card issuer, are among the businesses Americans complain about most to the bureau.

But those disputes are kept on what amounts to a shadow list of complaints that aren’t on the public portal. NerdWallet obtained the list through a Freedom of Information Act request to the government.

Green Dot and Credit One serve millions of consumers but escape CFPB scrutiny because of regulations that have not evolved with changes in financial technology. Those rules predate the Trump administration, which has moved to weaken the CFPB.

The bureau oversees banks with over $10 billion in assets. Although Green Dot and Credit One process tens of billions of dollars in transactions each year, they don’t have the combination of assets held by traditional banking institutions that pushes them above the $10 billion threshold.

Many other businesses have escaped scrutiny because of quirks in the CFPB system. Those businesses include ITT Educational Services, a large for-profit college the bureau sued in 2014 over predatory lending practices.

The CFPB did not respond to repeated requests to discuss the fairness or efficacy of its complaint system.

Unaccounted complaints

The CFPB was created to promote fairness and transparency in financial markets and to protect Americans from financial harm. The agency was given jurisdiction over a broad range of financial companies, including large banks and credit unions, debt collectors with over $10 million in annual revenue, mortgage servicers and student lenders.

Consumer complaints have helped set the agency’s priorities, informing the bureau’s enforcement and rule-making for financial institutions.

When the complaint portal went online in June 2012, Richard Cordray, then the bureau’s director, said it marked the first time “the general public has been able to see such individual-level consumer complaint data for financial products and services.”

The bureau invites consumers to use the database to evaluate whether they should do business with a company.

But NerdWallet found that about one of every three consumer complaints made between April 2013 and February 2018 do not show up on the bureau’s public portal.

During that span, the CFPB helped Americans deal with more than 850,000 complaints against financial companies. But roughly 420,000 other complaints are not on the bureau’s public database, NerdWallet found.

About two-thirds of those complaints were outside CFPB jurisdiction. The data show that the bureau forwarded them to the appropriate agencies, often the Federal Trade Commission. But none of those agencies maintains a public-facing complaint database for consumers.

‘Shadow’ patterns

California-based Green Dot Corp. has at least 1,580 complaints across its products. Out of the roughly 5,000 businesses that appear on the public portal, this would place it among the top 2% of companies consumers have complained about the most, NerdWallet’s analysis found.

Green Dot has become one of the country’s most widely distributed banking franchises. It issues prepaid cards for Walmart and other retailers, handles transactions for Apple Pay Cash, and has a partnership with Intuit’s TurboTax and 25,000 other tax preparers.

The company said customers loaded more than $21 billion onto its products during the first half of this year, a 40% jump from the same period in 2017. But only five complaints that mention Green Dot show up on the CFPB’s public complaint portal, all filed under different companies’ names.

NerdWallet reviewed hundreds of complaints on the shadow list and grievances consumers filed with state agencies.

Many Green Dot customers told regulators they have had money stolen from their accounts or experienced unauthorized charges and had difficulty resolving the problems.

Some consumers said that when they disputed transactions, Green Dot froze their accounts, cutting them off from money they had deposited to cover vital expenses. Millions of Americans use prepaid cards in lieu of checking accounts, or because they don’t qualify for traditional banking services.

Mary Drummer says she complained to Green Dot after noticing more than $4,200 of unauthorized charges on her Walmart prepaid card issued by Green Dot. Green Dot representatives told her she could not access any of her money until the company investigated, which might take at least two weeks, Drummer said in a complaint filed with the Ohio Attorney General in 2014.

“The money on that card was the ONLY income I have,” she wrote. “I absolutely cannot wait almost 2 weeks to receive my money.”

In an email to NerdWallet, Green Dot said it may block customers’ cards and mail them a replacement if they report unauthorized charges. It says it credited Drummer’s account within 10 days of her complaint.

The company said it strives for 100% customer satisfaction and responds promptly to all complaints, resolving most within 24 hours.

“While even one complaint is one too many, we believe that our customer satisfaction scores and complaint volumes are among the best in the banking industry,” the company said. “We believe the complaint volume referenced for this article represents approximately one complaint per 2 million customer transactions.”

Resolving conflicts

Consumer advocates say the CFPB’s complaint resolution process has led many businesses to improve their customer service, as they are more apt to resolve customer conflicts when their regulator is watching. The agency has said the system helped drive actions producing more than $750 million in relief for wronged consumers.

Financial industry executives argue that the system unfairly shames companies and provides them with inadequate opportunities to respond to consumers. One agency leader appointed by President Trump threatened in April to remove the entire complaint database from public view.

As the financial services market has evolved, some say the bureau should expand its regulatory authority to include companies such as Green Dot and Credit One.

“If we are concerned that these companies are taking advantage of consumers, that’s why the CFPB was created,” says Ira Rheingold, executive director of the National Association of Consumer Advocates. “The CFPB in a better time, where you have leadership that was interested in actually protecting consumers, they would look at that seriously.”

As it is, Green Dot escapes CFPB oversight because of a structural change the company made shortly before the CFPB database went online in 2012. Green Dot had been processing its prepaid card payments through Synovus Financial Corp.,
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a company that then had $26 billion in assets, making it subject to CFPB oversight.

But in December 2011 Green Dot acquired a small Utah bank and began processing prepaid card payments on its own. The move allowed the company to escape the CFPB’s public complaint system because the bank had less than $10 billion in assets.

Green Dot says it filed notice that it planned to acquire the bank before the CFPB was created.

The bureau sends Green Dot complaints to the board of governors of the Federal Reserve System, the company’s financial regulator.

The Federal Reserve says it investigates consumer complaints, making sure financial institutions have not violated any regulations. But the agency’s primary job is to make sure banks have adequate capital, a responsibility that critics say does not prioritize consumers’ needs.

“They see their customer as the lender — the financial institution — not the consumer,” says Ruth Susswein, a deputy director at Consumer Action, a nonprofit consumer advocacy group.

While Green Dot has escaped the CFPB’s public complaint portal, several of its competitors without bank subsidiaries have not. Empowerment Ventures LLC, owner of UniRush and the prepaid Rush Card, had amassed over 1,000 public complaints — until the company was purchased by Green Dot in 2017. Several months later, complaints about UniRush and the Rush Card stopped appearing on the CFPB portal.

That same year, UniRush and Mastercard
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were ordered to pay $13 million for system outages that blocked tens of thousands of consumers from accessing their money.

Nearly all complaints naming Netspend Corp., one of the few big companies that charge overdraft fees on its prepaid cards, are in full public view. By regulating some companies but not Green Dot, the CFPB is giving Green Dot a competitive advantage.

The bureau would not answer NerdWallet’s questions about that inequity.

Processing delays

Credit One Bank is the subject of at least 5,300 complaints that don’t appear on the public complaint portal. The Nevada-based company issues NASCAR credit cards, among others, and caters to people trying to rebuild credit. The bank’s name appears just eight times on the complaint portal, all related to complaints about different companies.

Credit One had more than $5.8 billion in outstanding balances last year, up 23% from 2016, according to the Nilson Report, which tracks consumer spending. That was the largest balance increase of any major credit card company, the publication found.

Many consumers have balked at Credit One’s late fees and the time it takes to process payments, NerdWallet found in its review of complaints consumers have filed with the CFPB and state attorneys general. Credit One often takes a week to credit payments, the complaints say.

Consumers say they’ve had trouble making payments online, forcing them to pay by phone, which incurs charges. Sometimes the company charges late fees even when payments were made on time, the complaints allege.

Consumers also have complained about billing disputes and difficulty closing accounts.

William Venable tried to cancel his Credit One card after learning that it had a $75 annual fee, which he did not see disclosed in his application, he said in a complaint filed with the Missouri Attorney General in 2016.

The company charged him the $75, plus a $25 late fee, before sending him his first bill, his complaint said. Venable, who was a doctoral student in health policy at the time, said he notified the company in writing to close the account and paid subsequent charges, minus the contested fees, but the company did not credit his payment.

Credit One later listed his account as delinquent with the credit reporting agencies, he said in his complaint.

Credit One did not respond to NerdWallet’s requests for comment.

‘Get them off there’

The bureau’s lawsuit against ITT Educational Services accused the company of luring students with misleading job prospects and strong-arming them into taking out private loans it knew they couldn’t afford.

ITT denied the government’s allegations. The case was closed after the company filed for bankruptcy.

In the wake of that lawsuit, the CFPB received more than 1,500 complaints about ITT, which went out of business in 2016. Only a handful of those complaints appear on the bureau’s website, all listed under other businesses.

James McCarthy, a former bureau employee who helped oversee its complaint resolution process from 2011 to 2015, says he tried to put ITT complaints on the complaint portal. But two of his superiors ordered him to take them down soon after they went online, he told NerdWallet.

“There was almost a sense of, ‘Oh, my God, you can’t do that, get them off there,’” McCarthy says. “I’m not sure why.”

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